Where to Exchange Currency Without Paying Big Fees

Currency exchange might not be the first thing you think about when planning a vacation to another country, but it could impact your budget in a big way — especially if you pay steep fees to do it. Even if you plan on using a credit card for most or all of your purchases, you’ll still have to deal with the cost of exchanging currency.

While exchanging currency always incurs a cost, there are ways you can do it without paying an arm and a leg. As with any financial transaction, planning ahead is the best way to find the solution that works for you and costs the least. Here’s what you’ll need to know.

What to know about currency exchange

Currency exchange allows you to buy things overseas in the local currency. As most countries don’t accept the U.S. dollar — although some do — you’ll need to exchange your U.S. dollar for the currency of the country you plan to visit.

There are plenty of ways to do this, and there is a whole industry built around currency exchange. But the middleman making the exchange for you will take a cut to perform that service.

Before you even start your trip, be sure to check the real-time currency exchange rate for the country(ies) you’ll be visiting. This way, you can easily see which money changers are giving you a fair rate, and which ones may be ripping you off.

Where to find currency exchange rates

Currency exchange rates are easy to find with a simple internet search. Numerous websites, such as xe.com and Oanda.com, offer real-time currency exchange quotes, as do various international money transfer websites.

You can also find the current exchange rate at your local bank, credit union or other financial institution. However, it’s important to note that there’s a difference between the live market exchange rate and the rate a bank or other institution offers to exchange your money. Further, different banks may offer different rates.

For example, if the real-time exchange rate between the U.S. dollar and the Philippine peso is 56.15, your bank might offer to buy your dollars at a rate of 55.75. Those rates may vary slightly at another bank down the street, so it pays to comparison shop.

Where to exchange currency for cheap

There are plenty of places to exchange U.S. dollars for foreign currency, but the amount you’ll pay to do it can vary significantly. If you want to exchange currency without paying big fees, it pays to do your homework. Here’s a look at various popular options.

Check with your bank or credit union

For many travelers, exchanging U.S. dollars for foreign currency at a bank or credit union is convenient. However, you’ll have to be wary of any fees your bank may change on top of the exchange rate while making the actual conversion.

One of the additional downsides of exchanging your currency before you begin your trip is that you’ll have to carry a large sum of cash to your destination, courting the risk of theft or loss. You also risk having too much foreign currency left over when it’s time to return home.

Get cash from an ATM

Getting cash from an overseas ATM can be a better option for travelers who only want to take out cash on an as-needed basis at their destination. This avoids the problem of traveling with large sums of cash and taking out more money than you end up needing.

The drawback of getting cash from overseas ATMs, however, is that many foreign terminals charge an access fee. Many U.S.-based banks also charge an additional fee.

Some banks, like Capital One 360 and HSBC, will not charge a fee for ATM withdrawals, even for those made abroad. If you plan on traveling overseas extensively — or even periodically — you may want to have an account at an institution that won't charge you.

Use your credit card

Using a credit card can be a good way to make a foreign exchange (FX) transaction if you’re paying for something overseas. At the time of purchase, you will likely be asked if you want to process the transaction in your home currency or the local currency. In nearly all cases, choosing the foreign currency will give you a better exchange rate.

However, this advantage can be negated if your credit card charges foreign transaction fees. These fees can amount to 1% to 3% of the transaction amount, making it expensive to convert dollars to foreign currency.

Order currency online

You can order foreign currency online from many banks and FX companies and even select home delivery. But depending on the institution, you may pay for the privilege. Instead, you’ll likely save if you order from a bank or credit union and pick up the money yourself.

However, there’s no denying the home delivery option is convenient, as you'll receive the currency you need without leaving the house.

Visit an airport kiosk

Airport kiosks can be one of the most convenient options for exchanging foreign currency. As a result, they are often among the most expensive as well.

When you’re in an airport, particularly in a foreign land, you’re a captive audience. You likely want to start your vacation as soon as possible rather than looking around for an affordable exchange option. Thus, airport kiosks can afford to charge higher fees.

If you’re looking for the easiest way to exchange money, an airport kiosk might fit the bill. Just know that you’ll likely be paying higher fees for the service.

Get a traveler’s check

Traveler’s checks are an old-fashioned option and are hard to find these days. American Express was historically the leader in issuing traveler’s checks, but even it no longer issues new ones, although it honors those already in existence.

You’ll have to shop around to find places that offer them. Visa, for instance, still offers traveler's checks through AAA, among other institutions.

The other problem with traveler’s checks is that they are just as hard to purchase as they are to use. Fewer and fewer overseas merchants now accept them.

The bottom line is that if you’re planning on funding your entire trip with traveler’s checks, you might want to consider a fallback option as well. If the merchants you use don’t accept your traveler’s checks, you’ll need cash or a credit card to make your payments.

Transfer money to a foreign bank

If you travel regularly or have residency in a foreign country, you may have a bank account at an overseas institution. In this case, you can use various online services or a bank's wire transfer department to transfer money to your foreign bank account.

Whether you use your U.S.-based bank to make the transfer or an online money transfer service, the rates and fees are likely to vary significantly from institution to institution. When computing the costs, be sure to take into account not just the exchange rate offered but also any fees that may be attached to your transfer.